Intel set to lose billions in EU, Denmark, USA fines?

Intel’s [NASDAQ: INTC] legal woes aren’t going to end anytime soon. The chip giant faced a $643 Million [$657M according to current exchange rate] fine for tax evasion in Denmark, while tomorrow [Wednesday, May 13th, 2009] we will see the EU verdict in the case of Market Development Funds [MDF], e.g. rebates given to dealers and system assemblers under condition that the dealer does not carry or promote products from Intel’s competitor.

According to current rules in the EU, if the chip giant is fined guilty following a nine-year long investigation by the EC [European Commission], Intel could be forced into paying a 10% fine over its last year revenue. According to the information we have in hand, Intel’s overall revenue for 2008 was $37.6 billion [€27.62 billion], e.g. the fine would be approximately be 3.76 billion USD or 2.76 billion Euro.

But the story does not end there – the EC fine is just one part of the potential verdict. The second part could be much more damaging for the company, because EC has the power at hand to issue an order similar to "cease and desist" letters in the US. Long story short – MDFs would become a thing of the past and any similar attempt to overturn the competition could result in a temporal ban of sale of all goods within the territories of the European Union. Given that the EU is now the largest market for many semiconductor corporations – this is a force to be reckoned with.

During the past 10 years, we heard a lot of stories about companies that had to take Intel’s MDFs, since one of the ways to operate on tender deals for the governments and other companies in the EU was to offer an SI[Systems Integrator] to purchase a processor, and get an Intel motherboard for free [$40-50 value]. This was confirmed to us by representatives in "the big three" of motherboard world on numerous occasions and several system integrators.

If this fine gets processed, European-based fines will almost entirely eat the profits from 2008 [5.29 billion USD] and the clock isn’t going to stop there. Intel will be embroiled in the anti-trust trial that will begin on February 20, 2010. The anti-trust suit will be five years old by then, but the important thing is that this particular case is not originating at US DoJ [Department of Justice] or FTC [Federal Trade Commission], but rather a civil suit brought by AMD [NYSE: AMD].

All in all, instead of writing about technology news, we are forced time to write about legal shenanigans. Oh brother.

About the AuthorTheo Valich

Focused on creating synergy between various industries, creating next-gen solutions.Passionate about the new and emerging technologies. Work experience spans from game development and event organizing, editing magazine and on-line publications to aerospace development.Specialties: Team Leadership / Management / Technical Consultant / Funding.Enjoys travelling around the world and meeting new people. :)